The head of the Bank of Canada is looking to a new frontier for digital currencies but he says one thing that won’t be changing is the central bank’s 2% inflation target.
Governor Tiff Macklem spoke to a business crowd in Montreal on Tuesday where he reflected in prepared remarks on “a pivotal year for the global economy.”
United States’ tariffs and protectionist trade policy bumped up against other structural economic changes in 2025 like the rise of artificial intelligence and the impacts of climate change.
Macklem said the economy will likely continue its restructuring in 2026 — the same year the Bank of Canada’s mandate from the federal government is up for renewal.
While he said the central bank is taking a “fresh look” at how it conducts monetary policy, Macklem was unwavering in his commitment to the bank’s flexible inflation target, which he said proved its mettle when costs soared during the post-pandemic recovery.
“Flexible inflation targeting has proven to be more successful and more durable than anything that came before,” Macklem said.
“Faced with a more shock-prone world, the anchor provided by the 2% target looks more important than ever.”
Macklem also touched in his remarks on the central bank’s upcoming roles regulating stablecoins and other looming updates to payments and banking in Canada.
In draft legislation from last month’s federal budget, Ottawa outlined a framework for stablecoins — a form of cryptocurrency backed by another asset like an existing currency. The value of these cryptocurrencies is typically more stable than fluctuating assets like Bitcoin, which tend to act as an investment vehicle rather than something used to pay for goods and services.
Macklem said it’s not clear how much of a role stablecoins will play in the future of money. But he said the Bank of Canada will be regulating these emerging digital currencies so Canadians can use them safely and confidently alongside physical cash.
“The technology is evolving rapidly and the regulatory framework will need to evolve to keep pace with the changing landscape,” he said.
Macklem said stablecoins will need to be pegged at a one-to-one ratio to a central bank currency and backed by high-quality liquid assets — treasury bonds are one possible example — so it can always be converted to cash.
He said conditions for buying and redeeming stablecoins and any associated fees will need to be made clear to consumers and businesses for the successful adoption of any proposed framework.